factual

Are the non-compete covenants in the Beauty Bungalows Franchise Agreement applicable both during the term of the agreement and after its termination?

Beauty_Bungalows Franchise · 2025 FDD

Answer from 2025 FDD Document

15.01 Covenants Not to Compete. During the term of this Agreement and for two (2) years after expiration, earlier termination, or approved Transfer of this Agreement for any reason (and during the term of this Agreement and for two (2) years from the date a person ceases to be an owner, shareholder, member, officer, or director of Franchisee), neither Franchisee nor any of Franchisee's owners, shareholders, members, partners, officers, or directors may participate directly or indirectly or serve in any capacity in any Competitive Business. This covenant not to compete applies: (i) during the term of the Agreement, within any state in which Franchisor or franchisees do business; and after termination of the Agreement within a twenty (20) mile radius from the boundary of Franchisee's Protected Territory, and within a twenty (20) mile radius from any franchised, Franchisor-owned, or affiliated company-owned Beauty Bungalows Studio; (ii) on the Internet; and (iii) on any other Multi-Area Marketing channels used by Franchisor.

This covenant not to compete is given in part in consideration for training and access to Franchisor's Trade Secrets, and which, if used in a Competitive Business without paying royalties and other payments, would give Franchisee an unfair advantage over Franchisor and Franchisor's franchisees. The unenforceability of all or part of this covenant not to compete in any jurisdiction will not affect the enforceability of this covenant not to compete in other jurisdictions, or the enforceability of the remainder of this Agreement.

Source: Item 22 — CONTRACTS (FDD pages 47–48)

What This Means (2025 FDD)

According to Beauty Bungalows's 2025 Franchise Disclosure Document, the franchise agreement includes non-compete covenants that apply both during the term of the agreement and for a period after the agreement's expiration or termination. Specifically, during the term of the agreement, the non-compete applies within any state where Beauty Bungalows or its franchisees conduct business.

For two years after the agreement's expiration, termination, or approved transfer, the non-compete restricts the franchisee (and their owners, shareholders, members, partners, officers, or directors) from participating in any Competitive Business. This post-term restriction is limited to a 20-mile radius from the boundary of the franchisee's Protected Territory and a 20-mile radius from any franchised, Beauty Bungalows-owned, or affiliated company-owned studio. The non-compete also applies to internet activities and other multi-area marketing channels used by Beauty Bungalows.

The FDD emphasizes that these covenants are in place to protect Beauty Bungalows's training programs and trade secrets. The agreement states that using these assets in a competitive business without paying royalties would unfairly advantage the franchisee. The document also clarifies that if any part of the non-compete is unenforceable in one jurisdiction, it does not affect its enforceability in other jurisdictions or the rest of the agreement.

Disclaimer: This information is extracted from the 2025 Franchise Disclosure Document and is provided for research purposes only. It does not constitute legal or financial advice. Consult with a franchise attorney before making any investment decisions.